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RBNZ Dated OIS Still Pricing A Hike In April

STIR
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RBNZ dated OIS pricing collapses 20-32bp across meetings as U.S STIR pricing shunts lower in the wake of the Silicon Valley Bank (SVB) collapse.

  • April meeting pricing softens to 16bp of tightening after being as high as 45bp last week. For reference, RBA-dated OIS has, at least temporarily, called an end to the tightening cycle with 25bp easing priced by end-22.
  • Terminal OCR expectations continue to tumble with pricing at 5.13%, well above RBNZ’s projected OCR peak of 5.50% and last week’s high of 5.64%. Up until last week, Terminal OCR expectations had traded in a 5.15-5.55% range since the RBNZ lifted its projected terminal OCR to 5.50% in the November MPS.
  • With the recent decline in terminal rate expectations more tied to global factors, this week’s Q4 GDP release offers a chance for the local market to refocus, at least temporarily, on domestic drivers.
  • After remaining surprisingly resilient in the face of aggressive tightening, recent data has become patchier with December quarterly declines for retail sales, manufacturing, and construction. BBG consensus currently expects -0.2% Q/Q for Q4 GDP versus the +0.7% expected by the RBNZ in its February MPS.

Figure 1: OCR & Terminal Rate (RBNZ Projections Peak & OIS Expectations)

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RBNZ dated OIS pricing collapses 20-32bp across meetings as U.S STIR pricing shunts lower in the wake of the Silicon Valley Bank (SVB) collapse.

  • April meeting pricing softens to 16bp of tightening after being as high as 45bp last week. For reference, RBA-dated OIS has, at least temporarily, called an end to the tightening cycle with 25bp easing priced by end-22.
  • Terminal OCR expectations continue to tumble with pricing at 5.13%, well above RBNZ’s projected OCR peak of 5.50% and last week’s high of 5.64%. Up until last week, Terminal OCR expectations had traded in a 5.15-5.55% range since the RBNZ lifted its projected terminal OCR to 5.50% in the November MPS.
  • With the recent decline in terminal rate expectations more tied to global factors, this week’s Q4 GDP release offers a chance for the local market to refocus, at least temporarily, on domestic drivers.
  • After remaining surprisingly resilient in the face of aggressive tightening, recent data has become patchier with December quarterly declines for retail sales, manufacturing, and construction. BBG consensus currently expects -0.2% Q/Q for Q4 GDP versus the +0.7% expected by the RBNZ in its February MPS.

Figure 1: OCR & Terminal Rate (RBNZ Projections Peak & OIS Expectations)

Keep reading...Show less